Infoscience

Thesis

Managing competing technology standards in the digital economy

Over the last decades, battles for technological dominance between competing and incompatible technologies have had a significant impact on competition within many high-tech industries. In this dissertation, we are concerned with the management of such standards wars. We recognize that many changes have occurred in the technology environment since the beginning of the digital economy (and especially the commercialization of the Internet). We acknowledge, in particular, that an alleged winner of a standards war can rarely "take all" in the current technology environment, whereas this was possible in the past. Therefore, using a qualitative literature survey supported by three case studies, we investigate how the fast-moving technology environment influences the tactical choices of companies trying to establish their products as de facto standards. We analyze the evolution of standards wars by determining the changes in influence factors and emerging technology trends. These changes increase the pressures on timing and the competition exposure in standards competitions. We develop the portfolio of tactics that competing companies should apply in the management of emerging standards wars, composed both of traditional and new deployment tactics. Borrowing from significant change factors and new deployment tactics in standards war, we specifically study a relevant dimension of current standards wars – conversion technologies. Technology digitalization simplifies and speeds up the development of converters allowing companies to overcome technology incompatibility. We differentiate between incumbent-provided and third-party converters. When converters are incumbent-provided, we develop mathematical models to analyze the effects of their introduction on the adoption process of competing, incompatible technologies in the presence of network externalities. Converter introduction may accelerate, extend or reverse the technology lock-in process. We determine which conversion options are profitable for weak, as well as for dominant, incumbents, depending upon the timing of converter introduction and the degrees of conversion. We find that the optimal strategy for weak incumbents is to introduce full one-way converters early on. For dominant incumbents, the optimal conversion option is the provision of two-way converters with partial compatibility for the users of the competing network at a later point in time. In a following piece, we extend our modeling framework by investigating the provision of third-party converters. We develop a mathematical model to analyze the effects of third-party converter introduction on the adoption process of incumbents' base technologies. We determine under what circumstances third parties may maximize their profit. We show that the optimal converter introduction time depends on a trade-off between conversion option and consumers' memory effect. The preferred conversion option is mostly two-way conversion. As a result, the lock-in process of base technologies gets accelerated due to third-party converter provision. From incumbents' perspective, we discuss how they can anticipate and react to third-party converter introduction. By keeping their network closed, creating an installed base early, developing a built-in converter and/or influencing consumers' converter perception, incumbents reduce third parties' incentive to introduce converters.

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